Australian shares rallied to close just shy of a fresh nine-month high amid indications of a slowdown in inflation, bolstering investor hopes that a peak in interest rates is nearing.
The benchmark S&P/ASX200 index closed 33.1 points, or 0.44 per cent higher, at 7490.4 on Tuesday, after earlier hitting a fresh nine-month intra-day high of 7492.2.
The broader All Ordinaries gained 36.3 points, or 0.47 per cent, to 7,710.5.
Sentiment was positive after a bounce in beaten-down technology stocks on Wall Street overnight, and lifted after National Australia Bank's monthly business survey showed the economy was beginning to slow, while inflation had passed its peak as of December.
The Australian Bureau of Statistics will release December quarter inflation data on Wednesday, ahead of a rate decision by the Reserve Bank next month.
Economists expect consumer prices to have risen 7.6 per cent in the December quarter.
"We had a business sentiment report from NAB that's led to a little bit of hope that tomorrow's inflation data maybe a softer print. Of course, if that is the case, then there will be less of a case for the RBA to hike rates," said City Index analyst Matt Simpson.
He expects the central bank to lift its cash rate by another 0.25 percentage point in February, but says there is expectation that inflation has either peaked or is getting closer to peaking.
The gains in the local market were led by mining and technology shares, with support from energy and property stocks, and came despite a decline in the heavyweight financials sector.
Miners were among the top performers as copper prices lifted on improving demand prospects in China. Top miners BHP, Rio Tinto and Fortescue Metals were up between 0.5 and 1.0 per cent.
Diversified miner South32 and IGO Ltd climbed more than 4 per cent each, while several gold and lithium shares also rose by a similar extent.
Technology stocks hit their highest level in more than a month, taking a cue from their Wall Street peers. ASX-listed shares of payments giant Block jumped nearly 6 per cent to $114.69, while software providers Xero and WiseTech Global climbed 3.3 per cent and 1.25 per cent respectively.
Energy stocks were also higher, with oil and gas producer Woodside Energy up nearly 0.3 per cent, while Viva Energy and Ampol rose 1.4 per cent and 1.6 per cent respectively.
Financial stocks proved to be a drag, with each of the Big Four major banks closing around 1.0 per cent lower.
Among other newsworthy stocks, Myer shares were up 5.3 per cent to 89.5 cents each, after the department store chain posted its strongest ever sales for the first five months of the financial year amid buoyant festive season shopping.
Kogan.com shares also settled 2 per cent higher despite the online retailer reporting its biggest ever half-year loss of $31.3 million, although investors were relieved by an improvement in its bloated inventory levels.
Meanwhile, the Australian dollar continued to trade higher as investors return to risky assets on easing fears of a global recession. The local currency was buying 70.40 US cents at 1700 AEDT, from 69.78 US cents at Monday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index closed 33.1 points, or 0.44 per cent higher, at 7490.4 on Tuesday.
* The broader All Ordinaries gained 36.3 points, or 0.47 per cent, to 7,710.5.
One Australian dollar buys:
* 70.40 US cents, from 69.78 US cents at Monday's ASX close
* 91.60 Japanese yen, from 90.62 Japanese yen
* 64.70 Euro cents, from 64.03 Euro cents
* 56.82 British pence, from 56.18 pence
* 108.13 NZ cents, from 107.84 NZ cents.